How and when economic policy uncertainty influences firms' strategic change: the role of CEO turnover and organizational inertia

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Xi Zhong ◽  
Weihong Chen ◽  
Ge Ren
Keyword(s):  
Economic Policy ◽  
Strategic Change ◽  
Negative Impact ◽  
Ceo Turnover ◽  
Mediating Effect ◽  
Policy Uncertainty ◽  
Content Type ◽  
Economic Policy Uncertainty ◽  
Organizational Inertia ◽  
The Impact

PurposeMany studies have examined the antecedents of firms' strategic change on a micro and meso level, but few studies have explored it from the macrolevel (e.g. economic policy uncertainty) perspective. This research draws attention to the impact of economic policy uncertainty on firms' strategic change.Design/methodology/approachThis research empirically tests hypotheses based on a sample of listed firms in China during the period between 2010 and 2017.FindingsBased on real options theory, the authors theorize and find that economic policy uncertainty will negatively affect firms' strategic change through the mediating effect of CEO turnover. Moreover, organizational inertia will strengthen the negative impact of economic policy uncertainty on CEO turnover and will weaken the positive impact of CEO turnover on firms' strategic change.Originality/valueFirst, this research contributes to the strategic change literature by demonstrating the important impact of economic policy uncertainty on firms' strategic change. Second, this research expands the literature on the economic consequences of economic policy uncertainty. Third, this research clarifies the path and boundary conditions of economic policy uncertainty affecting strategic change by introducing the mediating effects of CEO turnover and the moderating effects of organizational inertia.

Economic policy uncertainty, market returns and expected return predictability

2017 ◽  
Vol 9 (3) ◽  
pp. 242-259 ◽  
Author(s):  
Frederick A. Adjei ◽  
Mavis Adjei
Keyword(s):  
Economic Policy ◽  
Predictive Power ◽  
Negative Impact ◽  
Future Market ◽  
Policy Uncertainty ◽  
Market Returns ◽  
Expected Return ◽  
Content Type ◽  
Economic Policy Uncertainty ◽  
The Impact

Purpose Using the economic policy uncertainty (EPU) index as a proxy for the level of EPU, we study the impact of the level of EPU on the conditional mean of market returns and we examine the predictive power of EPU on future market returns. Design/methodology/approach We employ a GARCH-in-Mean model with exogenous variables. Findings The results show that even after controlling for business cycle effects, EPU is inversely related to contemporaneous market returns. Particularly, the authors find that the negative impact of EPU subsists only during recessions or recessionary states of the economy, and has no discernible effects during expansionary periods. Originality/value This is the first study to examine the predictive power of EPU on future market returns.

Economic policy uncertainty and fine wine prices

2020 ◽  
Vol 32 (3) ◽  
pp. 457-476
Author(s):  
Nithya Shankar ◽  
Bill Francis
Keyword(s):  
Economic Policy ◽  
Information Criterion ◽  
Government Policies ◽  
Time Lags ◽  
Policy Uncertainty ◽  
Content Type ◽  
Economic Policy Uncertainty ◽  
The Uk ◽  
The Impact ◽  
Wine Markets

Purpose The paper aims to investigate the impact of economic policy uncertainty (EPU) (i.e. uncertainty due to government policies) on fine wine prices. Design/methodology/approach The paper uses the Baker et al. (2016) monthly news-based measure of EPU for the leading wine markets: the USA, the UK, France, Germany and China in conjunction with monthly fine wine pricing data from the London International Vintners Exchange (Liv-ex). The wine sub-indices used are the Liv-ex 500 (Bordeaux), Burgundy 150, Champagne 50, Rhone 100, Italy 100, California 50, Port 50 and Rest of the World 50. The Prais–Winsten and Cochrane–Orcutt regressions are used for our analyses to correct for effects of serial correlation. Time lags are chosen based on the appropriate information criterion. Findings Changes in EPU levels negatively impact changes in the Liv-ex 500 index for all our leading wine markets except France, the Champagne 50 index for the UK and the Burgundy 150 and the Rhone 100 indices for Germany, with the effects being significant for at least up to a quarter before EPU is detected. The authors did not find significant results for the EPU of France. Practical implications The paper aims to provide insights into whether EPU creates opportunities or threats for investors and wineries. Originality/value A forward-looking news-based EPU measure is used to gain insights into how the different Liv-ex sub-indices react to increases in uncertainty centered around government policies across a sample of different countries.

scholarly journals Sensitivity of economic policy uncertainty to investor sentiment

2019 ◽  
Vol 36 (2) ◽  
pp. 114-129 ◽  
Author(s):  
Mobeen Ur Rehman ◽  
Nicholas Apergis
Keyword(s):  
Economic Policy ◽  
Investor Sentiment ◽  
Policy Uncertainty ◽  
Momentum Effect ◽  
Control Variables ◽  
Content Type ◽  
Economic Policy Uncertainty ◽  
Investor Sentiments ◽  
International Investors ◽  
The Impact

Purpose This paper aims to explore the impact of investor sentiments on economic policy uncertainty (EPU). The analysis also considers the momentum effect, stock market returns volatility and equity pricing inefficiencies across markets, which, to the best of the authors’ knowledge, has not been addressed in the literature. The role of these control variables has collectively been considered to have important behavioral implications for international investors Design/methodology/approach Quantile regressions are used for estimation purpose, as it provides robust and more efficient estimates rather than those coming from the traditional regression model. Findings The momentum effect is negative and significant only at higher quantiles, while oil prices are positive and significant across all quantiles. The exchange rate exerts a negative and significant effect on EPU, whereas equity price volatility (i.e. investor sentiment) exerts a negative and significant impact on EPU in most of the quantiles. Research limitations/implications The results have important implications for international investors and policymakers, especially in terms of the breakdown of economic policy uncertainty across different sample markets. The breakdown of complete sample period into sub-samples acts as a robust analysis and documents the similarity of the results for the Asian and developed markets cases, but not in the case of the European markets. Practical implications The findings imply the importance of financial stability that impacts the accumulation of systemic risks and adds smoothness to the financial cycle in particular geographical areas. Originality/value The contribution of this paper is threefold. First, existing literature highlights and empirically tests the impact of economic policy uncertainty on different market, macro-economic and global control variables. The analysis, however, performs it in the reverse order, i.e. analyzing the impact of the momentum effect (investor sentiment variables), equity market inefficiencies and volatility (market variables) and exchange rates and Brent oil (control variables). Second, to check the sensitivity of economic policy uncertainty, the analysis analyzes a wide range of markets, segregated as emerging, developed and European regions over the sample period to generate region-wise implications. Finally, the analysis explores the relationship of aforementioned variables with economic policy uncertainty keeping in view the non-linear structure and prior evidence and investor sentiments and economic policy uncertainty in the regression model.

scholarly journals Evidence of Economic Policy Uncertainty and COVID-19 Pandemic on Global Stock Returns

2022 ◽  
Vol 15 (1) ◽  
pp. 28
Author(s):  
Thomas Chinan Chiang
Keyword(s):  
Economic Policy ◽  
Stock Returns ◽  
Stock Return ◽  
Negative Impact ◽  
Global Market ◽  
Policy Uncertainty ◽  
Economic Policy Uncertainty ◽  
The Impact ◽  
Global Stock ◽  
The U.S

This paper examines the impact of changes in economic policy uncertainty (EPU) and COVID-19 shock on stock returns. Tests of 16 global stock market indices, using monthly data from January 1990 to August 2021, suggest a negative relation between the stock return and a country’s EPU. Evidence suggests that a rise in the U.S. EPU causes not only a decline in a country’s stock return, but also a negative spillover effect on the global market; however, we cannot find a comparable negative effect from global EPU to U.S. stocks. Evidence suggests that the COVID-19 pandemic has a negative impact that significantly affects stock return worldwide. This study also finds an indirect COVID-19 impact that runs through a change in domestic EPU and, in turn, affects stock return. Evidence shows significant COVID-19 effects that change relative stock returns between the U.S. and global markets, creating a decoupling phenomenon.

scholarly journals The Heterogeneity Research of the Impact of EPU on Environmental Pollution: Empirical Evidence Based on 15 Countries

2021 ◽  
Vol 13 (8) ◽  
pp. 4166
Author(s):  
Ying Chen ◽  
Xiaoqian Shen ◽  
Li Wang
Keyword(s):  
Air Pollution ◽  
Economic Policy ◽  
Co2 Emissions ◽  
Energy Demand ◽  
Negative Impact ◽  
Emerging Market ◽  
Policy Uncertainty ◽  
Economic Policy Uncertainty ◽  
Per Capita ◽  
The Impact

While economic growth has been the main goal of countries around the world, environmental problems such as air pollution have also arisen. Since the increase in economic uncertainty is limiting production capacity and consumers’ marginal propensity to consume, which reduces CO2 emissions, economic policy uncertainty has become one of the most important factors affecting CO2 emissions. COVID-19 has demonstrated that economic policy uncertainty reduces the enthusiasm of market participants, which, in turn, reduces energy demand and CO2 emissions. In order to further study the impact of economic policy uncertainty on air pollution, this study uses a panel model to empirically test the data for a sample of 15 countries covering the period from 1997 to 2019. According to the empirical results, we find that the economic policy uncertainty has a significant negative impact on per capita CO2 emissions. That is, the higher the uncertainty of economic policy, the lower the per capita CO2 emissions of countries. What’s more, this negative effect is larger in emerging market countries than in advanced countries.

scholarly journals How Does China’s Economic Policy Uncertainty Affect the Sustainability of Its Net Grain Imports?

2021 ◽  
Vol 13 (12) ◽  
pp. 6899
Author(s):  
Yuee Li ◽  
Jingdong Li
Keyword(s):  
Economic Policy ◽  
Environmental Sustainability ◽  
Negative Impact ◽  
Virtual Water ◽  
Policy Uncertainty ◽  
Trade Cost ◽  
Economic Policy Uncertainty ◽  
Embodied Carbon ◽  
Significant Negative Impact ◽  
The Impact

China is a considerable grain importer in the world. However, the sustainability of China’s grain imports has been greatly challenged by its increasing economic policy uncertainty (EPU). This paper constructs the indicators of economic and environmental sustainability of China’s net grain imports and analyzes the impact of its EPU index on these indicators with a Time-Varying Parameter Stochastic Volatility Vector Autoregression (TVP-SV-VAR) model to explore how China’s EPU affects the sustainability of its net grain imports. The main conclusions are as follows. (1) The sustainability of China’s net grain imports fluctuated from 2001 to 2019. (2) China’s EPU has a negative impact on the economic sustainability of its net grain imports. A higher EPU index leads to a lower net import potential ratio and higher trade cost. (3) China’s EPU has a significant negative impact on the environmental sustainability of its net grain imports. It has the greatest negative impact on virtual water imports and smaller impact on virtual land imports and embodied carbon emission. Therefore, China’s EPU affects the sustainability of its net grain imports negatively through its impact on its net grain import potential ratio, trade cost, and virtual land, virtual water, and embodied carbon emissions in net grain imports.

Economic policy uncertainty and hotel occupancy: the mediating effect of consumer sentiment

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Ozgur Ozdemir ◽  
Wenjia Han ◽  
Michael Dalbor
Keyword(s):  
Economic Policy ◽  
Structural Equation ◽  
Mediating Effect ◽  
Equation Modeling ◽  
Policy Uncertainty ◽  
Economic Uncertainty ◽  
Consumer Sentiment ◽  
Content Type ◽  
Economic Policy Uncertainty ◽  
The Relationship

PurposeThe purpose of this paper is twofold. First, the study examines the prolonged effect of policy-related economic uncertainty on hotel operating performance, particularly the room demand (occupancy). Second, the study attempts to explain why occupancy drops when the perceived economic uncertainty is high by studying the mediating effect of consumer sentiment in the relationship between economic policy uncertainty and hotel demand.Design/methodology/approachThis quantitative study uses secondary data – US economic policy uncertainty (EPU) index, University of Michigan's index of consumer sentiment (ICS), and property-level hotel operating data from three states of the US – California, Florida and New York. Data were analyzed using random effect regression and structural equation modeling. Robustness tests were conducted to enhance the reliability of the research findings.FindingsRandom-effects regression analysis reveals that policy-related economic uncertainty has a negative and lead-lag effect on hotel occupancy, average daily rate and revenue per available room (RevPAR). Structural equation modeling results show that the relationship between economic policy uncertainty and hotel occupancy is significantly mediated by consumer sentiment. Robustness test results support the findings from the main analysis.Practical implicationsThis study offers valuable implications for the hotel professionals in regard to anticipating the economic impact of policy-related uncertainty on hotel industry and understanding how consumer sentiment affects demand at such crises times. Moreover, the study suggests potential course of actions to deal with declining room demand at times of uncertainty.Originality/valueThis empirical study explores how economic policy uncertainty affects hotel performance at the property level and explains the mediating effect of consumer sentiment on hotel room demand. The study provides a first-hand evidence of how consumer sentiment relates to the perception of economic uncertainty and leads to decline in consumer demand. In that regard, findings of the study have valuable implications for hospitality industry practitioners and relevant policymakers.

The impact of politics and economic policy uncertainty on anomaly-based investment strategies

2019 ◽  
Vol 45 (5) ◽  
pp. 654-670
Author(s):  
Cedric Mbanga ◽  
Jeffrey Scott Jones ◽  
Seth A. Hoelscher
Keyword(s):  
Economic Policy ◽  
Hedge Funds ◽  
Investment Strategy ◽  
Portfolio Performance ◽  
Policy Uncertainty ◽  
Investment Strategies ◽  
Party Affiliation ◽  
Content Type ◽  
Economic Policy Uncertainty ◽  
The Impact

Purpose The purpose of this paper is to explore the overlooked relationship between politics and the performance of anomaly-based investment strategies. Design/methodology/approach Monthly long-short portfolios are formed based on relative mispricing scores according to the Stambaugh et al. (2012, 2015) relative mispricing measure. Portfolio performance is examined throughout various presidential terms. The design also introduces economic policy uncertainty (EPU) as a possible explanatory variable for portfolio performance. Findings The analysis reveals that anomaly-based returns are higher under Republican administrations than they are under Democratic administrations. Moreover, the results show that the impact of EPU on the relationship between the political party affiliation of the president and future anomaly-based returns are driven by the election and post-election years. Practical implications The examination of returns on a long-short portfolio may be of particular value to investment companies, such as hedge funds, who regularly employ this type of strategy. Originality/value While the impact of presidential terms on raw equity returns has been well examined, the paper is the first to examine the impact of presidential terms on the return of an anomaly-based investment strategy. EPU is also introduced as an important contributing factor.

Economic policy uncertainty and firms' labor investment decision

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Jian Chu ◽  
Junxiong Fang
Keyword(s):  
Economic Policy ◽  
Human Capital ◽  
Optimal Allocation ◽  
Investment Decision ◽  
Capital Allocation ◽  
Investment Efficiency ◽  
Policy Uncertainty ◽  
Content Type ◽  
Economic Policy Uncertainty ◽  
The Impact

PurposeThe purpose of this paper is to empirically investigate the impact of economic policy uncertainty on firms' labor investment decision, which includes labor investment level and efficiency, especially human capital allocation.Design/methodology/approachThis paper uses Economic Policy Uncertainty Index for China and Chinese A-share listed firms in the period 2002–2016 to constructs a sample of 20,779 firm-year observations and applies the methods of pooled OLS regressions to do an empirical study.FindingsThis paper finds that firms' labor investment is negatively correlated with economic policy uncertainty. And firms' labor investment efficiency (and overinvestment in labor) is positively (negatively) correlated with economic policy uncertainty, which is more significant for non-SOEs and firms with less government intervention. Further, the positive relation between economic policy uncertainty and labor investment efficiency is more significant for labor-intensive firms, firms in competitive industry, firms in developed labor market and firms under strong labor law protection. In addition, economic policy uncertainty induces firms to make adjustment on human capital structure and allocate more employees with high human capital, which eventually helps firms achieve higher total factor productivity.Social implicationsThe study of this paper indicates that the government needs to consider economic policies' impact on firms when introducing and changing policies and guide firms to improve human capital allocation under different internal and external conditions to finally realize the optimal allocation of social resources.Originality/valueThis paper studies the influence of external economic policy environment on firms' labor investment decision, which lacks adequate attention in the literature and indicates that under economic policy uncertainty, firms actively decrease labor demand and increase labor investment efficiency by optimizing human capital allocation.

Understanding the effects of economic policy uncertainty on US tourism firms’ performance

2021 ◽  
pp. 135481662098314
Author(s):  
Conrado Diego García-Gómez ◽  
Ender Demir ◽  
Ming-Hsiang Chen ◽  
José María Díez-Esteban
Keyword(s):  
Economic Policy ◽  
Firm Performance ◽  
Negative Impact ◽  
Generalized Method Of Moments ◽  
High Growth ◽  
Policy Uncertainty ◽  
Tobin’S Q ◽  
Tobin's Q ◽  
Economic Policy Uncertainty ◽  
The Impact

This study analyzes the impact of economic policy uncertainty (EPU) on the performance of US tourism firms using a sample of 296 publicly traded tourism companies from 2000 to 2018 with a sample of 3068 firm-year observations. Estimation results of panel regressio tests based on the system-generalized method of moments indicate that EPU has a negative impact on return on assets (ROA), return on equity (ROE), and Tobin’s Q. Our results are consistent for different variable specifications. We also find that firm size and leverage play a moderating role in the relationship between EPU and firm performance. Panel quantile regression results show that the impact of EPU on US tourism firm performance is asymmetric. Specifically, low-performing (25% quantile of ROA and ROE) firms are less affected by EPU, and for the case of Tobin’s Q, EPU does not affect firms with a high growth opportunity (100% quantile of Tobin’s Q).

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